Nancy Pelosi lands in Taiwan: what does it mean for the chip stocks?


Chip stocks are in focus on Tuesday as Nancy Pelosi – Speaker of the U.S. House of Representatives landed in Taiwan even though China warned against it.

Why does it matter for the semiconductor stocks?

Beijing reads the visit as a sign that the United States is against the “One China” policy. Considering that Taiwan produces as much as 90% of the world’s most-advanced chips, the geopolitical tensions between the U.S. and China could mean a setback for the semiconductor industry.

Still, Mizuho’s Vijay Rakesh is convinced the near-term impact of Pelosi’s expected visit to Taiwan will be somewhat muted. This afternoon on CNBC’s “Power Lunch”, he said:

In the near-term, I don’t see much impact unless the situation escalates. Nonetheless, it underscores the need of the CHIPS Act, of having onshore manufacturing for semiconductor supply for data centres and computing.

China reopening could be a tailwind for chip stocks

The iShares Semiconductor ETF recovered roughly 20% in July, which “could” extend further, according to Rakesh, as China continues to pull out of the COVID restrictions.

China is a big market for semiconductors. These geopolitical tensions are seeing export restrictions on semi-cap equipment. But it’s a greenfield for U.S. chips suppliers. So, reopening in China could help many of the other chip suppliers.

A day earlier, U.S. Congress passed the “CHIPS and Science Act” that aims at spilling $52 billion into the semi space to boost domestic chip production. Even with the last month’s rebound, “SOXX” are still down more than 25% versus the start of 2022.

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